Corn Imports by Japan at 26-Year Low as Buyers Turn to Wheat

Corn imports by Japan, the world’s largest buyer, will stay at the lowest level since 1986 as record prices spur feed makers to increase purchases of cheaper alternatives, a trade group said.

Shipments this year will be little changed from 15.3 million metric tons in 2011, said Mitsuyoshi Haruno, executive director at the Japan Feed Trade Association. Feed makers, ramping up output hurt by a record earthquake and tsunami last year, will boost consumption of wheat, wheat bran and dried distillers’ grains with solubles, or DDGS, he said.

Corn climbed to a record $8 a bushel on July 23, soaring 58 percent from the June 15 settlement, as drought scorched crops in the U.S., the world’s top producer and exporter, triggering concern that global food costs will gain. The U.S. government declared almost 1,300 counties in 29 states are natural-disaster areas because of the drought.

“A rally in global grains prices has prompted end-users to search for the most-affordable supply,” said Charlie Utsunomiya, director at the Tokyo office of U.S. Wheat Associates. “For Japanese feed makers, U.S. white wheat shipped from the Pacific coast is less expensive than corn exported from the Gulf of Mexico as shipping costs are lower.”

Wheat futures in Chicago advanced to $9.4725 a bushel on July 23, the highest level since August 2008, as droughts threaten crops in countries from the U.S. to Russia. Even so, U.S. white wheat has been offered to Japanese feed makers at a discount to Chicago futures as supply is abundant, Utsunomiya said. Australia is also offering feed wheat to corn buyers at competitive prices, he said.

Feed Wheat

Japan imported 334,349 tons of feed wheat in the first five months of this year, surging from 62,415 tons in the same period last year, according to data from the finance ministry. The U.S. was the top supplier with 198,699 tons or 59 percent of the total shipments, followed by Australia with 127,807 tons.

Imports may exceed the plan set by the agriculture ministry in March to purchase 764,000 tons of feed wheat this fiscal year, Haruno said. The ministry, which controls overseas purchases and domestic sales of wheat for supply stability, bought 420,000 tons in the year ended March 31.

Japan imported 6.51 million tons of corn in the five months ended May 31, 0.8 percent more than a year earlier, according to the agriculture ministry. Of the total, grain for feed production amounted to 4.36 million tons, declining 3.1 percent from the same period last year. The remainder was used for food, sweetener and industrial purposes.

Ukraine, Romania

The U.S. supplied 85 percent of Japanese corn imports in the five months, with Ukraine representing 10 percent and Romania 1.2 percent. For the full year, the U.S. ratio may drop below 80 percent, the lowest-ever level, as Japan will boost purchases of cheaper South American grains, according to Nobuyuki Chino, president of Continental Rice Corp. in Tokyo.

Corn represented 45 percent of Japanese livestock feed produced in the year ended March 31, declining from 47 percent in the previous fiscal year, said Haruno at Japan Feed Trade Association. The ratio may drop further this fiscal year to around 43 percent because of substitution, he said. Wheat’s ratio may exceed 3 percent from 1.7 percent last fiscal year.

The December-delivery corn contract gained 0.2 percent to $7.775 a bushel in Chicago at 6:14 p.m. Tokyo time today.

To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net; Yasumasa Song in 東京 at ysong9@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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